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Swadeshi Cotton Mills Co. Ltd. Vs. Sales Tax Officer and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAllahabad High Court
Decided On
Case NumberCivil Misc. Writ Petn. No. 2572 of 1963 connected with C.M. Writ Nos. 1291 and 1447 of 1963
Judge
Reported inAIR1965All86; [1964]15STC505(All)
ActsConstitution of India - Articles 19, 226 and 358; Uttar Pradesh Sales Tax Act, 1948 - Sections 2 and 2(1); Uttar Pradesh Sales Tax (Amendment) Act, 1963
AppellantSwadeshi Cotton Mills Co. Ltd.
RespondentSales Tax Officer and anr.
Appellant AdvocateTej Narain Sapru, Adv.
Respondent AdvocateStanding Counsel
Excerpt:
(i) constitution - writ - article 226 of constitution of india - writ filed without resorting to statutory remedies - sales tax authorities on erroneous interpretation of statue threatened to recover tax -- held, high court can exercise jurisdiction under article 226. (ii) applicability of sales tax - sections 2(c) and 2(h) of u.p sales tax act, 1948 - meaning of 'dealer' and 'sale' - canteens for workers maintained by mill on non profit basis - held, such mills are dealer within the meaning of this act - also transaction in those canteens satisfy the connotation of sale and is liable to sales tax. - cantonments act[c.a. no. 41/2006]. section 346 & cantonment fund (servants rules, 1937, rules 13, 14 & 15: [h.l. gokhale, ag. cj, p.v. hardas, naresh h. patil, r.m. borde & r.m. savant, jj].....oak, j.1. i have read the judgment prepared by my learned brother satish chandra, j. i agree that the sale of food in the canteens maintained by the two mills is liable to tax under the u. p. sales tax act, 1948 (hereafter referred to as the act), but the fee charged by aligarh muslim university to cover expenditure on dining halls is not liable to sales tax.2. section 3 is the charging provision. under section 3, every dealer has to pay a tax on his turnover. the term 'dealer' has been defined in clause (c) of section 2:'dealer' means any person or association of persons carrying on the business of buying or selling goods.....'admittedly, the two mills are engaged in various operations in order to earn profit. the two companies carry on the business of buying and selling goods. there is.....
Judgment:

Oak, J.

1. I have read the judgment prepared by my learned brother Satish Chandra, J. I agree that the sale of food in the canteens maintained by the two mills is liable to tax under the U. P. Sales Tax Act, 1948 (hereafter referred to as the Act), but the fee charged by Aligarh Muslim University to cover expenditure on dining halls is not liable to sales tax.

2. Section 3 is the charging provision. Under Section 3, every dealer has to pay a tax on his turnover. The term 'Dealer' has been defined in Clause (c) of Section 2:

'Dealer' means any person or association of persons carrying on the business of buying or selling goods.....'

Admittedly, the two mills are engaged in various operations in order to earn profit. The two companies carry on the business of buying and selling goods. There is no doubt that the two Companies are dealers as defined by the Act.

3. The question has been raised whether the activity of the mills in so far as they sell food in canteens constitutes business. It is true that the mills are under an obligation to maintain the canteens. But that circumstance does not alter the fact that this particular operation is a part of the general activity of the two mills in manufacturing goods. Maintaining canteens should be considered as a part of the general business of the mills. It is true that the mills do not earn a profit from the canteens as such. But that does not alter the fact that food is sold in the canteens. Profit is not an essential element of sale. A sale at cost price is also a sale. The stand taken by the respondents is further supported by Clause (aa) of Section 2:

'Business of buying or selling includes such business carried on without the motive of making profit'.

Clause (aa) of Section 2 makes it clear that, although the canteens show no profit, this particular activity can be treated as business of buying or selling. The two mills are, therefore, liable to pay sales tax for the sale of food in the canteens.

4. Dining halls maintained by Aligarh Muslim University are on different footing. The University is not engaged in any commercial activity. The university is an educational institution. Its activities are predominantly academic. Before an association of persons is called upon to pay tax under Section 3, it has to be established that the association of persons is a 'dealer' as defined in Clause (c) or Section 2 of the Act. The association of persons must run a business of buying or selling goods. The question, therefore arises, 'does the University carry on the business of buying or selling goods ?'

5. A casual sale of a single article will not imply that a person carries on the business or buying or selling goods. If a man sells old newspapers in order to get rid of rubbish lying in the house, it cannot be said that he carries on business of buying or selling goods. It is true that Clause (aa) of Section 2 has enlarged the scope of the expression 'business of buying or selling'. But even Clause (aa) of Section 2 has not fundamentally altered the concept underlying the term 'business'. The word 'business' usually connotes some commercial activity. Every human activity cannot be termed 'business for purposes of Clause (c) of Section 2 of the Act. As already pointed out, Aligarh Muslim University is engaged in academic activity. It is not engaged in business according to the usual sense of the term. Supply of food to students in dining halls is incidental to the general academic activity of the University. The incidental provision of food in dining halls does not imply that, the University carries on the business of buying or selling goods. The University is not a 'dealer', as defined in Clause (c) of Section 2. The University is not, therefore, liable to pay sales tax on the fee charged by it from students for covering the expenditure over dining halls.

6. Opposite party No. 1 at first passed an ex parte order (Annexure A) on 26-10-1962. That ex parte order was set aside. Another order (Annexure B) in the same terms was passed on 13-3-1963. Since the ex parte order (Annexure A) has already been set aside, there is no need to quash that order. It will be sufficient to quash the subsequent order dated 13-3-1963. Proceedings in pursuance of the notice dated 20-2-1963 will also have to be dropped.

Satish Chandra, J.

7. These companion writ petitions have been referred to a Bench as they raise a question of considerable general interest. The question is does a person statutorily obliged to establish and run a canteen or dining-hall for serving refreshments at a non-profit basis, carryon a 'a business of buying and selling goods' so as to attract liability to sales tax?

8. In Civil Miscellaneous Writ No. 2572 of 1963, Swadeshi Cotton Mills Company Limited is the petitioner. The petitioner company carries on the business of manufacture and sale of textile and allied goods at Kanpur. The petitioner has established and maintains within its factory premises a canteen, where food stuffs are prepared and sold exclusively to the workmen employed by the petitioner company. The petitioner asserts that the canteen is run strictly at cost, without any profit motive. The Sales Tax Officer, Special Investigation Branch, Kanpur, by a notice, which was served on the petitioner on 2-5-1962 required the petitioner company to take the registration certificate from the Sales Tax Department under Section 8-A, U. P. Sales Tax Act, 1948. The petitioner company has been called upon to furnish the figures of sales for the years 1958-59 to 1981-62.

9. The petitioner company on 5-5-1962 sent a reply to the Sales Tax Officer. In the reply it was asserted that the petitioner company had maintained the canteen under Section 46, Factories Act, 'to effect sales of food and refreshment to the employees of the factory on a no profit basis' and as such it was not a 'dealer' within the meaning of the U.P. Sales Tax Act and was not liable to be taxed or to be registered under that Act. The Sales Tax Officer on 21-9-1962 addressed a letter to the petitioner stating that 'Despite the fact that your canteen is stated to be carrying on business on a no loss no profit basis' it has to be treated as a 'dealer' liable to be taxed on sales of taxable goods. It requested the petitioner to file statements of sales of the canteen by 5-10-1962 for the assessment years 1958-59 to 1961-62. Ultimately, on 28-3-1963 the first respondent, namely, the Sales Tax Officer issued a notice under Section 21, U. P. Sales Tax Act, 1948, seeking to initiate proceedings For assessment of sales tax in respect of the sales effected in the canteen of the petitioner company for the above mentioned four years.

10. The petitioner company thereupon came to this Court and filed this petition under Article 226 of the Constitution. The petitioner states that from the correspondence which has ensued between the company and the Sales Tax Officer, it is apparent that the Sales Tax Officer has taken the view that the company in spite of the fact that it was running the canteen service on a no profit basis, was liable to pay sales tax on the refreshments served by it to the workmen. It is urged that this view is completely erroneous in law and the notice under Section 21 of the Act is without jurisdiction. It is prayed that the notice dated 28-3-1963 be quashed and the respondent be prohibited from proceeding with the assessment proceedings initiated under the said notice. The main contention advanced for the petitioner is that it is not a 'dealer' within the meaning of the Sales Tax Act. The Act, therefore, is inapplicable to it and the respondent has no jurisdiction to initiate proceedings for assessing the petitioner to tax in respect of the sales at the canteen.

11. For the respondent, a preliminary objection is raised. It is urged that the V. P. Sales Tax Act provides a complete machinery for obtaining relief in respect of any improper orders that maybe passed by the Sales Tax Authority; and a person who is aggrieved by any action of the Sales Tax Authorities, cannot in law be permitted to abandon resort to that machinery and to invoke the jurisdiction of the High Court under Article 226 of the Constitution when he has an adequate remedy by way of an appeal, revision etc. Support for this objection is drawn from the Supreme Court decisions in C. A. Abraham v. Income Tax Officer, Kottayam : [1961]41ITR425(SC) and Bhopal Sugar Industry Ltd. Madhya Pradesh v. D.P. Dube, 1963-14 STC 410 (SC).

12. In Abraham's case : [1961]41ITR425(SC) the Supreme Court ruled that an aggrieved person cannot be permitted to abandon resort to statutory machinery and to invoke the jurisdiction of the High Court under Article 226 of the Constitution when he had adequate remedy open to him by an appeal. Their Lordships went on to observe:

'But the High Court did entertain the petition and has also granted leave to the appellant to appeal to this Court. The petition having been entertained and leave having been granted, we do not think that we shall be justified at this stage in dismissing the appeal in limine.'

13. A similar situation arose in the present case. The present petitions under Article 226 of the Constitution were entertained by a learned Single Judge of this Court. The learned Single Judge was of the view that the points raised in the petition were of importance and there was no decision of this Court on the point. He also found that the vires of the U. P. (Amendment) Act, XIV of 1963, were challenged in the petition. He, therefore, referred this case along with other cases to a Division Bench. Under these circumstances, the dictum of the Supreme Court is applicable,

14. In Bhopal Sugar Industry's case, 1963-14 STC 410 (SC) the Supreme Court held that normally the High Court does not exercise its jurisdiction under Article 226 when the Statute under which tax is sought to be levied provides a remedy by way of an appeal, but the High Court has jurisdiction to decide whether the taxing authority has arrogated to himself power which he does not possess, or where the taxing authority threatens to recover tax on an interpretation of statutes which is erroneous.

15. These observations also leave room for deciding the question raised on the merits of the petition. Under the circumstances I consider it desirable that the petition be not dismissed in limine.

16. Section 46 of the Factories Act authorises the State Government to make rules requiring that in any specified factory wherein more than 250 workers are ordinarily employed, a canteen shall be provided and maintained for the use of the workers. The rules may provide for the food stuffs to be served in the canteen and the charges which will be made therefor. The State Government in exercise of this power has framed Rule 68 of the U. P. Factories Rules, 1950. This rule requires the occupier of every factory, which is specified by the State Government, to provide an adequate canteen according to the standards prescribed in this rule. The various sub-rules provide for the size of the building, the dining hall, equipments etc. which have to be maintained by the occupier in the canteen. Sub-rule (15) states that the food, refreshment etc. served in the canteen shall be served on non-profit basis and the prices charged shall be subject to the approval of the managing committee. The managing committee is to consist of equal number of persons nominated by the employer and elected by the workers. Pursuant to these rules, the petitioner was obliged to establish and maintain a canteen.

17. The petitioner contends that it has no choice in running the canteen. It is a statutory obligation which it has to fulfil in order to carry on its main, business of manufacture and sale of goods. Under the rules, the service of food and refreshments has to be on a non-profit basis. The petitioner company has no choice even in respect of the prices charged. They have to be approved by the managing committee. The petitioner asserts that the canteen is open only to its workmen and that it is subsidised by the company.

18. The question is whether the provisions of the U. P. Sales Tax Act are applicable to the petitioner company.

19. By Entry No. 48 of List II Seventh Schedule of the Government of India Act 1935, the provincial Legislatures were authorised to make laws regarding taxes on the sale of goods. By virtue of this entry, the U. P. Sales Tax Act was enacted in 1948.

20. Section 2(e) of this Act defines a 'dealer'. It says 'dealer' means any person or association of persons carrying on the business of buying or selling goods in Uttar Pradesh, whether for commission, remuneration or otherwise and includes any firm or joint Hindu Family or any Society, club or association which sells goods to its members and also includes any department of the State Government or the Central Government which carries on such business

21. Section 2(h) of the Act says that 'sales' means with its grammatical variations and cognate expressions, any transfer of property in goods for cash or deferred payment or other valuable consideration; but does not include a mortgage, hypothecation, charge or pledge.

22. Thus, though the State Legislature was empowered by the Government of India Act to tax sales of goods, the Sales Tax Act limits its operation to sale of goods in the course of a 'business of buying or selling' goods. Under Section 3 of the Act, the liability to pay sales tax has been fixed on a dealer. As defined in the Act, a 'dealer' means a person who carries on business of buying or selling of goods. Therefore, a sale in the course of a business of buying or selling of goods atone attracts liability to tax.

23. The vital question to be considered is the import of the phrase 'Business of buying or selling of goods'. Attempts in the past have been made to tax canteens like the one involved in the present case- on the sale effected by them, on the footing that a profit motive is not an essential ingredient of 'business'. Various High Courts held that 'business' for the purposes of the Sales Tax Act should be understood in a commercial sense, that is to say, it is an organised activity carried on with a view to earn profit or gain. If the profit motive was absent, the person carrying on an activity wouldnot be a 'dealer' within the meaning of the Act It was held that where a person is statutorily obliged to run a canteen on an entirely non-profit basis, he is not a 'dealer'. Shree Meenakshi Mills Ltd. v. State of Madras, : AIR1954Mad1143 ; Cannon Dunkerley & Co. (Mad) Ltd. v. State of Madras, 1954-5 STC 216 (241): (AIR 1954 Mad 1130 at p. 1142); Chairman Committee of Management Integral Coach Factory Canteen, Madras v. Deputy Commercial Tax Officer, Perambur, 1962-13 STC 827 (Mad); W. P. A. Soundarapandian and Brothers v. Deputy Commercial Tax Officer, Nilakottai, Madurai, 1962-13 STC 870 (Mad) and State of Mysore v. Banglore Woollen Cotton and Silk Mills Co. Ltd., 1962-13 STC 106 (Mys).

24. In the case of Kanpur Development Board v. Commissioner, Sales Tax, U. P., 1983-14 STC 493 (All) the precise question as to the signification of the term 'carries on business' in the definition of 'Dealer' in the U. P. Sales Tax Act 1948, arose for decision in this Court Desai C. J. (K. B. Asthana, J. concurring) held that the word 'business' has been used in the definition of the word 'dealer' in the narrow or restricted sense and not in the general or broad sense. It means an activity in order to earn a livelihood and to make a profit and does not mean simply remaining occupied with something. Their Lordships held that the legislature did not use the word 'business' merely to indicate a continuous activity because then it would have used such words as 'practice', 'activity' or 'system'. Their Lordships emphasised that gain or profit was a vital ingredient in the concept of 'business' in the definition of 'dealer' in the Act. This decision was rendered on 19-3-1963.

25. On 25-5-1963, the U. P. Taxation Laws Amendment Act, 1963 (Act No. XIV of 1963) came into force. Section 4 of this Act introduced after Clause (a) of Section 2 of the U. P. Sales Tax Act, 1948, the following new clause.

'(aa) Business of buying or selling includes such business carried on without the motive of making profit.'

The amending Act says that the above new clause shall always be deemed to have been inserted in the Sales Tax Act, 1948.

26. By this amendment, the concept of 'carrying on business' in the context of the U. P. Sales Tax Act has been Fundamentally--changed. The decision of a Bench of this Court in Kanpur Development Board's case, 1963-14 STC 493 (All) has been set at naught. To be a dealer within the Act it is not necessary that a business of buying or selling must be carried on with a profit motive. The Income Tax Act as well as the Excess Profits Tax Act use the phrase 'carries on business'. In Mazagaon Dock Ltd. v. Commissioner of Income Tax and Excess Profits Tax : [1958]34ITR368(SC) the Supreme Court held :

'The word 'business' is, as has often been said, one of wide import and in fiscal statutes, it must be construed in a broad rather than a restricted sense.'

The Supreme Court reiterated with approval its following observations in Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax, (8) AIR 1995 SC 116 at p. 181 :

'The word 'business' connotes some real, substantial and systematic or organised course of activity or conduct with a set purpose'

27. It appears that the State Legislature by the amendment mentioned above, has made its intention clear and brought its concept of the phrase 'carries on business' as used in the Sales Tax Act, in line with the views of the Supreme Court. By Legislative explanation, profit motive has been excluded from the essential ingredients of carrying on business of buying or selling.

28. The petitioner company in running the canteen is undoubtedly carrying on a substantial and systematic activity with a set purpose. Its purpose may not be to make profit or gain but may only be to fulfil its statutory obligations or to provide for the welfare of its workmen; but the nature of the purpose is no longer of any consequence. In order to do its main profit making business of manufacture and sale the petitioner engages in the activity of running the canteen. The canteen is a step-in-aid of the petitioners business. From this view point, an ultimate profit motive is visible. In any view, the petitioner company is a 'dealer' within the meaning of the term in the Sales Tax Act.

29. In this situation, learned counsel for the petitioner raised a two-fold submission. He contended that the U. P. Taxation Laws Amendment Act, 1963, in so far as it inserts the aforesaid new clause with retrospective effect, violates the petitioner's fundamental rights guaranteed by Article 19 of the Constitution. The petitioner is a company registered under the Income-tax Act in State Trading Corporation of India Ltd. v. Commercial Tax Officer AIR 1963 SC 1811 the Supreme Court has declared that the word 'citizen' in Article 19 of the Constitution is confined to natural persons and not to juristic persons like companies registered under the Indian Companies Act. Such Companies not being 'citizens', cannot ask for the enforcement of fundamental rights guaranteed by Article 19 of the Constitution. In this view it is not open to the petitioner company to urge that the Taxation Laws Amendment Act is void as it infringes Article 19 of the Constitution.

30. Article 358 of the Constitution suspends the provisions of Article 19 of the Constitution while a proclamation of emergency is in operation. It says that nothing in Article 19 shall restrict the power of the State to make any law or to take any executive action while a proclamation of emergency is in operation. It is a matter of general information, of which a court can take judicial notice, that a proclamation of emergency within meaning of Article 358 of the Constitution, is in operation in the country since October, 1962. On this ground also the petitioner cannot complain of any violation of Article 19 of the Constitution.

31. The petitioner has not impleaded the State of Uttar Pradesh as a party to the writ petition. In the absence of the State the petitioner cannot be permitted to challenge the validity of the U. P. Taxation Laws Amendment Act, 1963.

32. In the next place it was urged for the petitioner that a 'Dealer' is under the Act liable to tax on its 'turnover' Section 2(1) of the Act indicates 'turnover' to mean the aggregate amount of the proceeds of 'sale' of a dealer. Before theproceeds of a transaction can be taxed it must be transaction of sale as understood in the Sale of Goods Act. As so understood, it is essential that there should be a mutual assent between the vendor and the purchaser before a transaction can in law be treated as a 'sale'. The argument proceeds that the petitioner has by Statute been forced to maintain the canteen and he having no choice or volition of his own, the transaction, of supplying refreshments etc. in the canteen cannot be designated as a 'Sale'

33. In State of Madras v. Gannon Dunkerley & Company (Mad) Ltd. : [1959]1SCR379 the Supreme Court held that the power conferred by Entry No. 48 List II was restricted to enacting legislation imposing tax liability in respect of sale of goods as understood in the Sale of Goods Act, 1930, and that the Provincial Legislature under the Government of India Act, 1935 had no power to tax a transaction which was not a sale of goods, as understood in the Sale of Goods Act This view was reiterated by the Supreme Court in New India Sugar Mills Ltd. v. Commissioner. Sales Tax, Bihar : AIR1963SC1207 Their Lordships in the latter case further observed :

'It is manifest that under the Sale of Goods Act a transaction is called sale only where for money consideration property in goods is transferred under a contract of sale. Section 4 of the Sale of Goods Act was borrowed almost verbatim from Section 1 of the English Sale of Goods Act, 56 and 57 Vict. C. VI. As observed by Benjamin in the 8th Edition of his work on 'Sale'. 'to constitute a valid sale there must be a concurrence of the following elements viz. (1) parties competent to contract; (2) mutual assent; (3) a filing, the absolute or general property which is transferred from the seller to the buyer; and (4) a price in money paid or promised.''

34. The contention for the petitioner is that the second necessary element, namely, mutual assent is lacking in me present case. It is said that the Statute forces the petitioner to run a canteen. Under the Factory Rules, the petitioner has no choice in the conduct of the canteen or in fixing the prices or in the persons who can be served in the canteen. For this aspect, reliance is placed on the Supreme Court decision in New India Sugar Mills' case, : AIR1963SC1207 . In that case the course of dealing was that the Government of various States used to intimate to the Sugar Controller of India their requirements of Sugar from time to time. Similarly, the factory owners used to send to the Sugar Controller a statement of stocks of sugar held by them. The Sugar Controller used to make allotments directing the sugar companies to supply sugar to the State Government in question specified quantities of sugar. In pursuance of the allotment order, sugar used to be supplied on payment of price.

35. It was contended that the sugar despatched pursuant to the direction of the Controller was not 'Sale' by the mills to the Governments of the State and sales tax was not exigible in respect of those despatches. The Supreme Court held that before a transaction can in law be a sale, it must be based on a contract for sale for which mutual assent of the contracting parties is essential, that is to say, there ought to be a voluntaryoffer and acceptance of the offer. The Supreme Court held that when the Provincial Government gave intimation of its requirements to the Sugar Controller, it did not make any offer to purchase to the Controller because the Controller was not the manufacturer of sugar or its agent. The communication of the allotment order to the sugar mill was not of any offer made by the purchasing State which it was open to the assessee to accept or decline. Mere compliance of the despatch instructions of the Controller, which in law the Sugar mill could not decline to carry on, did not amount to acceptance of an offer. Their Lordships further observed that there being no offer or acceptance, the_ parties never came in contract as contracting parties and the despatch of sugar did not result in any sale of goods.

36. It is manifest that in that case individual transactions themselves were controlled. The parties had no volition or choice in making the transaction itself,

37. In the instant case, at the point of time when the transaction takes place, namely, when a particular refreshment or drink is supplied in the canteen, there is no control by any outsider. The petitioner company displays the goods in the canteen for the use of its workmen. Thereby it invites offers from the workmen. The workmen are free to visit or not the canteen. When they visit the canteen and take the goods, they voluntarily make an offer. The canteen accepts the offer and makes the supply on payment of the price, A contract results and the properly in the goods passes. At the point of time when the transaction takes place the parties come in contact and do enter into a contract of sale voluntarily, In my opinion, the transaction in the canteen is a 'sale' within the meaning of the Sale of Goods Act, 1930.

38. Mutual assent may be express or implied. Offer and acceptance in order to make a contract need not be in the ordinary form known to a trader. In order to ameliorate the lot of poverty-ridden labourers, the legislature has made regulatory laws. The Factories Act and its Rules are an example. These impose conditions subject to which a person can many on a business by employing more than 250 workers in a factory. One condition is that he must maintain a canteen for the benefit of his workmen. This is not an absolute restriction. It is open to a person not to carry on any business by employing more than 250 workmen, but if he does so he impliedly consents to make contracts in respect of refreshments, etc. in a canteen established by him. The fact that the price is controlled by the managing committee is not material. The provision of the managing committee is ostensibly to ensure efficient management and to ensure a fair deal to the workers. It is not intended to control the offer or acceptance at the time when the transaction takes place, Under the law of Sale of Goods, the motive force impelling a person to create conditions wherein he would be in a position to make offers or accept them, is immaterial. It cannot be urged that the petitioner is a servant or agent carrying out the legislative mandate of the Factories Act and the Rules. The petitioner is dealing not with any master's property or attending merely to a master's interests. Thecanteen is the property of the petitioner. The petitioner makes specific bargains therein. The relationship between the petitioner and the workmen is that of vendor and purchaser. In my opinion, the transactions carried on at the canteen do in law answer the connotation of 'sale'.

39. The petitioner company in running the canteen is a 'dealer', the transactions whereof are 'sales' and are liable to tax under the provisions of the U. P. Sales Tax Act.

40. In the result, the petition is liable to be dismissed.

41. In Civil Misc. Writ No. 1447 of 1963 J. K. Jute Mills Co. Ltd. v. Sales tax Officer, similar questions are raised. Along with J. K. Jute Mills Company Limited, Kanpur Sri Sunder Lal is also a petitioner. It is stated in the petition that Sri Sunder Lal is a contractor and he manages the canteen on behalf of the company. The terms of the contract have not been disclosed in the petition. If Sri Sunder Lal is merely a servant or agent of the company, he has no independent status or locus standi to maintain the petition. But if he is an independent contractor, he is running the canteen in pursuance of a contract entered into by him voluntarily with the company. He cannot complain that he is running the canteen under any statutory obligation. The other points raised in this petition have already been dealt with above.

42. This petition also deserves dismissal.

43. In Civil Miscellaneous Writ No. 1291 of 1963 Aligarh Muslim University is the petitioner. It maintains dining-halls wherein it serves food and refreshments to its resident students. The Sales Tax Officer, Aligarh by an order dated 13-3-1983 assessed the University to sales tax on its turnover of Rs. 2,75,687.39 n.P. for the year 1957-58, He on 20th February, 1963 issued a notice under Section 21, U. P. Sales Tax Act, for initiating assessment proceedings for the year 1958-59 in respect of the turnover of food and refreshments served by the University. The petition states that the first respondent is threatening to take action for assessment of sales tax for subsequent years. The petition prays that the assessment order dated 13-3-1963 be quashed and the respondents be prohibited from taking any proceedings in virtue of the notice dated 20th February, 1963. It is contended that the University is not a 'dealer' within the meaning of Sales Tax Act and the transactions of supply of food and refreshments to the students do not answer the connotation of the term 'sale'. As such, the provisions of the U. P. Sales Tax Act are not attracted to the University and the respondent has no jurisdiction to proceed to assess the University to sales tax.

44. The Aligarh Muslim University is predominantly a residential and teaching University. Chapter XII of the Academic Ordinances framed by the University provides that at least 75% of the students of the university shall be resident students. The University has established several 'halls' for residential purposes. Each hall has several hostels and has a dining-hall, a prayer room a common room and a playground. Chapter XLIX of the Regulations of the Academic Council provides that the dining-hall shall be under the supervision of a warden who shall supervise meals and shall be in charge of the supervision of the dining-hall, andthat the meals shall be served in the dining-hail morning and evening at notified hours. Every resident student of the University has tn join the dining-hall. From a perusal of the Prospectus of the University (Page 68) it appears that the University charges from its resident students the following monthly fees:

'Resident

1. Food and Nastha (including Rs.Sulaimart Hall) ................ 31.002. Kitchen establishment ............ 3.508. Establishment Fee .... .... ...... 6.754. Light charges. ... ...... .... 3.505. Hall Games Fee ............ 0.506. Hall amenities .. ........ 0.50Total 45.75 Note:--Food charges in Sulaiman Hall are Rupees

23.50 (Excluding Nasha)'

45. The following rules with respect to food and Nastha charges are mentioned:

1. Students joining a Hall after the 15th of a mouth shall pay half food charges for the month and those who join after the 25th shall pay Re. 1 per clay for food. Other hostel charges shall be charged for the whole month.

2. In the months of April and May the food charges of the examinees will be on weekly basis for a period not exceeding 21 days. If the period exceeds 21 days, the student will be charged for the whole month.

3. In case a student has been exempted by the Provost on medical or other grounds from taking his meals from the Dining Hall he shall be charged Rs. 3.50 for Dining Hall Establishment P. M. and Aftab Hall students may be exempted from Nastha as well. Application for such exemption from food and Nastha charges must reach the Provost before the commencement of the calendar month for which exemption is claimed.

4. Students who were on leave of absence from the hostel or who were permitted by the Provost not to take meals from the Dining Hall for one full Fortnight will be allowed a remission of half charges.

5. Remission will be granted only to such students as obtain previous permission from the Provost for absence from the Hall or exemption from taking their meals in the Dining Hall provided they apply for such remission within 30 days from the last date of the period for which remission is claimed.

6. Proportional remission from food charges shall be allowed to students in the following cases:

(i) When a student is on leave of absence from the hostel for one week or more during the autumn recess or winter holidays, or on account of his participation in the N.C. Camps, authorised University tours including Games tours and Departmental excursions etc.

(ii) When a student is on leave of absence from the hostel for more than one calendar month on medical grounds.

46. It is apparent that the fee charged under the head 'Food and Nastha' is not the actual price of the food in fact consumed by a student It appears to be approximated with the expense that the University may incur in providing the food and Nastha to the students. The remissions in the fees for food and Nastha are an exception. Generally each resident student has to pay the monthly fee irrespective of the amount of food that he consumes or the number of days that he actuallyutilises the dining-hall services.

47. One essential ingredient of a 'sale' is price in money paid or promised. The question for consideration is whether the fee charged by the University from each resident student is a price in money. In its nature and character price is essentially different from a fee. The following observations of Shah, J. (as he then was) are apposite: Ratilal Panachand v. State of Bombay : AIR1953Bom242 :

'The argument in my view loses sight of the essential character of a fee. A fee is not a payment in the nature of price paid for buying an article or remuneration for services rendered pursuant to a contract. The fee levied is the distributive share of the liability under a scheme for distribution of liability which falls on any person who either claims the service or who obtains the benefit of the service provided by a State, whether or not that person obtains his share of service which he regards in value as equivalent to the amount that he is called upon to pay.'

His Lordship goes on to observe:

'There is a distinction--and a well recognised distinction--between what may be regarded as price for service which may be obtained and the levy of a lee. If a compulsory service is provided by the State all persons who became eligible for the service have to pay for the same, according to the rate at which the liability is imposed. Provided the total cost of supplying the service bears a just and true relation to the total levy, it is immaterial that burden of the levy on some persons is not commensurate with the value of the service actually rendered to them.'

48. The principle enunciated by Shah, J. is applicable to the instant case. Here the charges paid by the students bear a rather remote relation to the actual value of the food stuffs received and consumed by them. The total cost of supplying the food service bears a just and true relation to the total charges made in the shape of food stuffs. Annexure 'A' to the petition is a copy of the assessment order passed by the respondent for the assessment year 1957-58 as against the petitioner. It shows that during that year the University received a sum of Rs. 2,75,687.39 nP. as Food and Nastha fee, while, the University spent a sum of Rupees 2,81,341.87 n.P. on this account.

49. The levy of a fee by the University is, in vieu of the facts, a fee properly so called in law. It is not price for the food stuffs. If the food and nastha charges paid by the students are not price, the transaction of supplying them cannot be termed a 'sale' In that view, sales tax will not be exigible on the University in respect of the dining-hall service.

50. It was also argued by the learned counsel for the petitioner that the University does not carry on the business of buying and selling and, as such, it does not answer the definition of the term 'dealer' This argument is contested by the learned counsel for the respondents For the respondent, reliance is placed upon the case of the State of Bombay v. Hospital Mazdoor Sabha : (1960)ILLJ251SC . In this case Gajendragadkar, J. (as hethen was) speaking for the Court held that a group of hospitals run by the State for the purpose of giving medical relief to the citizens and for helping to impart medical education are an undertaking within the meaning of the term 'industry' as defined in the Industrial Disputes Act. The definition of 'industry' in that Act is very wide. It includes a trade or business or service. His Lordship in paragraph 12 of the judgment observed:

'If all the words used are given their widest meaning, all services and all callings would come within the purview of the definition; even service rendered by a servant purely in a personal or domestic matter or even in a casual way would Fall within the definition.... .......

We must, therefore, consider where the line should be drawn............. and that no doubt issomewhat difficult problem to decide.'

51. On the other hand, the learned counsel for the petitioner relies upon the case of National Union of Commercial Employees v. M.R. Meher : [1962]44ITR891(SC) . In this case Gajendragadkar, J., speaking for the Court held that a Firm of solicitors carrying on the work of an attorney is not an 'industry' within the meaning of the Industrial Disputes Act.

52. For the petitioner, reliance is also placed on University of Delhi v. Bam Nath : (1963)IILLJ335SC . In this case also Gajendragadkar, J., spoke for the Court. It was held that the work of imparting education conducted by educational institutions like the University of Delhi and the college run by it is not an 'industry' within the meaning of Section 2(j) of the Industrial Disputes Act, His Lordship observed:

'Education seeks to build up the personality of the pupil by assisting bis physical, intellectual, moral and emotional development. To speak of this educational process in terms of industry sounds so completely incongruous . . . .....'

Prima facie to speak of this educational process in terms of being a 'business' equally sounds incongruous.

53. In paragraph 8, Gajendragadkar, J., proceeded to observe:

'It is true that like all educational institutions the University of Delhi employs subordinate staff and this subordinate staff does the work assigned to it; but in the main scheme of imparting education, this subordinate staff plays such a minor, subordinate and insignificant part that it would be unreasonable to allow this work to lend its industrial colour to the principal activity of the University which is imparting education. Paragraph 9 of this Judgment reads: 'It is well known that the University of Delhi and most other educational institutions are not formed or conducted for making profit; no doubt, the absence of profit motive would not take the work of any institution outside Section 2(j) if the requirements of the said definition are otherwise satisfied. We have referred to the absence of profit motive only to emphasise the fact that the work undertaken by such educational institutions differs From the normal concept of trade or business.'

54. The learned counsel for the petitioner argues, and in my opinion not without force, that the activity of providing meals to its residential students is such a minor, subordinate and insignificant part that it would be unreasonable to allow this work to lend a business colour to the University so as to make it an institution carrying on the business of buying and selling. The Supreme Court further observed in the case of the University of Delhi : (1963)IILLJ335SC :

'Education in its true aspect is more a mission and a vocation rather than a profession or trade or business, however wide may be the connotation of the two latter words under the Act.'

55. The University dining-hall service cannot be compared with a hotel serving its guests. Arbuckle in his book 'Student Personnel Services in Higher Education' at page 205 observes :

'There is general agreement that the institution is responsible for the physical, mental and emotional well-being of the student who lives on the campus twenty four hours a day. The college obviously has a greater responsibility to a dormitory student than a hotel has to one of its guests. If an institution of higher learning is interested in a complete education for its students, then it will accept the responsibility for the total living conditions that they experience during their stay on the campus.'

'The aim of education is the creation of a well-educated, healthy young generation imbued with a rational progressive outlook on life.' (at page 1876)

56. The dining-hall service is an integral part of the University for imparting education to the students. It is indissolubly blended with, and is an inseparable component of education of this University. I find it difficult to appreciate the respondent's argument that the dining hall service of the University should be separately treated and qua this activity the University should be treated as carrying on the business of buying or selling. In my opinion, the University is not a 'dealer' as defined by the Safes Tax Act.

57. This petition is entitled to succeed. I would quash the assessment order and prohibit the respondents from proceeding further with the assessment proceedings initiated under notice, dated 20th February, 1963.

BY THE COURT:

58. Civil Miscellaneous Writs Nos. 2572 of 1963 and 1447 of 1963 are dismissed with costs.

59. Civil Miscellaneous Writ No. 1291 of 1963 is allowed with costs. The order of opposite party No. 1 dated 13-3-1963 (Annexure 'B' to the writ petition) is quashed. The opposite parties are prohibited from pursuing the assessment proceedings initiated under the notice dated 20-2-1963 (Annexure 'C' to the Writ petition).


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